Friday, January 28, 2011

Bankruptcy Appeals

The path of a bankruptcy appeal is as follows:
(1) Bankruptcy Court renders a final decision; 
(2) Appeal from the Bankruptcy Court decision is filed before either the Federal District Court or Bankruptcy Appellate Panel ("BAP")(appellant, meaning the person filing the appeal, can elect to have either the BAP or Federal District Court hear the appeal);
(3) Then, appeal from either the BAP or Federal District Court decision is filed before the Circuit Court of Appeals in your geographic area; and
(4) Finally, appeal from the decision of the Circuit Court of Appeals is filed with the Supreme Court of the United States.


Step One: Obtain a decision from the Bankruptcy. 

Step Two:  If you are considering appealing a final decision from the Bankruptcy Courts,  it can be a time consuming and expensive process. From the Bankruptcy Court, you would appeal to the Federal District Court in your District or the Bankruptcy Appellate Panel ("BAP").   The appellant, meaning the one appealing the Bankruptcy Court's decision, has the choice of electing to file his/her appeal before either the Federal District Court or the BAP.  If your bankruptcy appeal is heard before the Federal District Court, it will be decided by one Federal District Court judge.  If your bankruptcy appeal is heard by the BAP, it will be decided by a panel of three Bankruptcy Judges.  The Bankruptcy Judge who originally made the decision that triggered the appellate route cannot be one of the three judges on the BAP hearing your appeal.  From my experience, this first level of appeal is usually as far as most bankruptcy appeals are taken.

Step Three:  From there, the next level of appeal would be filed with the Court of Appeals for your Circuit.  There are a total of thirteen (13) Federal Circuit Courts of Appeal. The Country is divided into twelve (12) regional areas for appeals from cases in the federal system (the first 11 Circuit Courts of Appeal cover multiple districts, the 12th or D.C. Circuit Court of appeals covers only cases in the Washington, D.C. area). The 13th or Federal Circuit Court of Appeals is a little different.  The Federal Circuit Court was created in 1982 by merging the United States Court of Customs and Patent Appeals with the appellate division of the United States Court of Claims, and it has nationwide jurisdiction to hear appeals within those few subject matter areas.  Below is a map of the areas the Circuit Courts of Appeal covers. 

For example, the Court of Appeals for the First Circuit, where I practice, covers the geographic areas of Massachusetts, Rhode Island, Maine, New Hampshire and Puerto Rico.
Step Four:  Appeals from Circuit Court of Appeals are filed with the Supreme Court of the United States.  Generally, the First Circuit is the last stop for most appeals.  The Supreme Court of the United States ruled on only four major bankruptcy decisions in 2010 (Please see my blog dated January 6, 2011 summarizing those Supreme Court cases) so it is unlikely that the Supreme Court would choose to hear your bankruptcy appeal. But, you never know.

Educating:  Each week, as part of a national educational project with the Bankruptcy Section of the Federal Bar Association, each Circuit has a "Circuit Summary Writer" who summarizes the cases in his or her Circuit and then these case summaries are circulated to the members.  I am the Summary Writer for the First Circuit.
Below are the cases I posted this week:

Aja v. Fitzgerald, 2011 Bankr. Lexis 138 (BAP 1st Cir. 1/19/11)(Before Judges Votolato, Lamoutte and Tester, Opinion by Bankruptcy Judge Votolato).
Appeal dismissed as moot.  Appellant filed a Chapter 11 case, which the US Trustee successfully moved to convert to Chapter 7 (on grounds the debtor did not have liability insurance on her property), which conversion hearing the debtor did not appear claiming no notice.  The debtor requested reconsideration, which the Bankruptcy Court denied.  The debtor unsuccessfully appealed:  Although debtor appealed the denial of reconsideration, it did not appeal the conversion order nor seek a stay pending appeal; and, at the time the appeal was heard the Chapter 7 case had been substantially completed.  Substantively, the record did not support the debtor’s position, with the BAP admonishing the pro se debtor to avoid sanctions by not continuing meritless litigation.  Companion case of  Aja v. Emigrant Bank, 2011 Bankr. Lexis 131 (BAP 1st Cir. 1/19/11)(Before Judges Votolato, Lamoutte and Tester, Opinion by Bankruptcy Judge Votolato)(Court also dismissed debtor’s challenge to stay relief orders, as only the Chapter 7 trustee, and not the debtor, had standing to take any appeal).

Frati v. Gennaco, 2011 U.S. Dist. Lexis 6563 (D. Mass. 1/25/11)(Patti B. Saris, District Judge).
District Court affirmed Bankruptcy Court’s dismissal of plaintiff’s non-dischargeability complaint against the debtor as untimely under Fed. R. Bankr. P 4004(a). Case converted from Chapter 11 to 7; notices in the Chapter 7 case set forth the date to file non-dischargeability complaints which notice plaintiff’s counsel did receive.  The Chapter 7 Trustee had continued for a second time the 341(a) meeting, awaiting documents from the debtor.  At that meeting, the Trustee advised creditors he would be filing a motion to extent the discharge deadline, and the creditors in question relied on that.  However, the Trustee moved pursuant to 4004(b) to cover the Trustee and did not reference 4004(a) to cover other creditors.   Where a motion is unambiguous, it applies only to the moving party.  Although the Supreme Court has held that Rule 4004(a) is not jurisdictional, it is strictly construed (but the Circuits are split as to whether the Rule allows equitable exceptions).

Massillion v. Riley, 2011 Bankr. Lexis 83 (BAP 1st  Cir. 1/11/11)(Before Judges Votolato, Lamoutte and Tester, Opinion by Bankruptcy Judge Lamoutte).
BAP reversed and remanded to be consistent with the legal position that (1)The corpus of a valid testamentary spendthrift trust is excluded as property of the bankruptcy estate, (2) The distributions from the trust to the debtor received by the debtor in the first 180 days of the bankruptcy case are property of the estate per 11 U.S.C. §541(a)(5)(A); and, (3) Distributions received after 180 days from date of petition filing are not property of the estate. 

Banco Popular v. Torres (In re Torres), 2011 Bankr. Lexis 130 (BAP 1st Cir. 1/19/11)[not for publication](Before Judges Kornreich, Hillman and Bailey, Opinion by Bankruptcy Judge Bailey).
BAP vacated and remanded Bankruptcy Court’s finding that a portion of the secured creditor’s claim be disallowed, as it was based on grounds not articulated in the debtor’s objection such that the creditor had no opportunity to be heard on the basis for disallowance.  The argument centered upon the debtor’s objection to paying the lender’s costs and fees to file a POC on a mortgage that was current pre and post-petition.

In re Seger, Chapter 13 Debtors Case 10-42776-MSH, (Bankr. D. Mass. 1/24/11)(Melvin S. Hoffman Bankruptcy Judge)[unreported].
Court denied Chapter 13 Trustee’s motion to dismiss debtor’s case for “non-compliance”.  Debtors maintained funds from their business, a dance school, in an FDIC insured account, which was not on the Trustee’s approved list of financial institutions.  Court found there is no obligation for the debtor to maintain their operating accounts exclusively in US Trustee approved depositories.  Here, the debtor wanted a bank closer to home with banking fees lower than the Trustee approved institution.  11 U.S.C. §345 does not apply to Chapter 13 debtors, even though applicable to Chapter 7 trustees and Chapter 11 trustees or DIP’s.


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